Alstom Asks France to Back GE as Uncertainty Hits SalesFrancois de Beaupuy
Alstom SA Chief Executive Officer Patrick Kron called on the French government to back a $17 billion offer by U.S. rival General Electric Co. for its energy units, saying uncertainty about his company’s future is making it difficult to win orders.
“GE’s offer is an excellent option,” Kron told France’s National Assembly yesterday. The bid meets government concerns about France’s energy independence, local decision making and potential job cuts as there are almost no overlaps between the companies’ operations, he said.
Kron’s renewed support for GE’s bid contrasts with comments by French Economy Minister Arnaud Montebourg, who yesterday reiterated a preference for Siemens AG’s proposal to swap most of its rail business for Alstom’s energy assets in a deal that would form two leading European energy and rail companies. While Kron said he would examine any rival offer, he told the lawmakers that he wants a swift solution.
“Today, it’s not easy to get orders,” the executive said. “This current period full of uncertainties mustn’t last for a long time.”
Munich-based Siemens may decide as early as this week on an offer, contingent on sufficient access to Alstom’s books and management, people familiar with the matter said last week.
Alstom dropped 1 percent in Paris trading as of 10:30 a.m. while the French benchmark CAC 40 Index declined 0.2 percent. The stock had jumped as much as 18 percent on April 24 after Bloomberg News reported on the talks with GE.
France last week passed legislation extending the government’s ability to block foreign takeovers into the fields of energy, transport and health care.
The decree was a “decision to put an end to a form of laissez faire,” Montebourg told the National Assembly. “Our companies aren’t prey, but they need alliances. They’re not available for dismantling -- particularly when they have our strategic interests in their hands.”
The move by Montebourg, an admirer of Louis XIV’s dirigiste finance minister Jean-Baptiste Colbert follows a tradition of French state intervention in business and is aimed at capping unemployment as the country struggles with a stagnant economy and record-high joblessness.
President Francois Hollande Hollande, who said May 6 that GE’s bid is “not acceptable,” demanded the U.S. company sweeten its offer to protect jobs and is seeking assurances that a deal won’t threaten France’s nuclear industry. His government is seeking to extract concessions from Fairfield, Connecticut-based GE and has been pushing Siemens to make a binding offer.
GE is in early-stage talks with state-controlled nuclear group Areva SA and other French companies about asset sales or partnerships as it awaits direction from the French government on whether it must sell assets to get the deal done, people familiar with the matter said last week. GE is exploring concessions, including entering ventures in areas from nuclear power to wind-turbines to rail signaling, they said.
Areva said yesterday it may examine a tieup with Alstom’s offshore wind-turbine business once the merger of its own wind operations with that of Spain’s Gamesa Corp. Tecnologica SA is completed.
“GE has told us that they want to improve their proposal by taking our requests into account,” Montebourg told journalists after the hearing. “I don’t know what they are able to do.”
Siemens is getting the same access to Alstom’s data and management as GE, Kron told reporters. Alstom has given its board until June 2 to review GE’s bid and any rival offer.
GE and Siemens are circling Alstom to add turbines and other equipment for power plants and transmission networks amid rising infrastructure demand. While Alstom is looking to use the proceeds of a sale of energy units to bolster its train and signaling operations as well as pay down debt and reward shareholders, the French government wants to gain broader electorate support, according to William Mackie, an analyst at Berenberg.
Kron reiterated yesterday his company lacks the critical mass to compete with its larger U.S. rival, Siemens and emerging market power-equipment suppliers.
“The process which is starting is rigorous, fair and transparent,” Kron told the National Assembly. “A stand-alone strategy would be dangerous.”